Africa : Foreign investment 'fails Africa'

African nations are gaining little benefit from foreign direct investment, according to a United Nations report.

Hopes that foreign investment could be the key to development in Africa have "not been realised", the UN Conference on Trade and Development (UNCTAD) said.

Overseas developers have pumped billions of dollars into Africa's oil and mining industries.

But little of this money is filtering through to improve the daily lives of Africa's poorest people, UNCTAD said.

Foreign investment in Africa reached $18bn (£9.8bn) in 2004, compared with $14bn in the previous year.

But much of that investment was targeted at Africa's resource-rich oil and mining industries, which often generate low tax revenues and carry high environmental and social costs.

"The expectation for foreign direct investment to create growth, to create diversification, technology spillover and jobs has not really been fully realised according to expectations," UNCTAD Secretary-General Supachai Panitchpakdi said.

UNCTAD highlighted Tanzania and Ghana as examples of countries which have experienced a boom in foreign investment - particularly in their gold industries.

But both Tanzania and Ghana receive as little as 5% of the value of their gold exports, UNCTAD said.

The organisation pointed to the example of South Africa and Botswana, which encourage companies to do more of the 'value-adding' processing of diamonds domestically, rather than sending them abroad.

Mr Panitchpakdi urged African nations to closely scrutinize foreign investment schemes to ensure they were of more benefit to domestic economies.

He also called on African governments to diversify their economies away from traditional "extractive" industries such as mining and oil.